July Coffee Futures – Tuesday Technicals

Coffee Futures Technical Analysis

Today’s price action in coffee looks to be the resumption of the overall downtrend outlook we have been monitoring.  Expectations are for this market to continue lower in a zig-zag fashion, carving out waves 3, 4, and 5 of (C) of 5.  Looking at the weekly chart, this will be the culmination of an ending diagonal wave C that will establish a major, long-term bottom and provide for an excellent, long-term procurement opportunity. Critical resistance for this interpretation is 114.05, meaning any rally that terminates before this level is deemed a selling opportunity.  This would also be a stop-loss level for any short positions.

Coffee Futures Technical Analysis

Getting a closer look on the hourly chart, you can see the long-term down trend line has worked nicely. Also, there is nice bearish divergence in price and momentum from the most recent rally coming to fruition.

Coffee Futures Technical Analysis

Supporting Evidence Using Moving Averages

Supporting evidence can be found in our multiple moving average chart.  Prices have now gone below all moving averages, suggesting that market participants are more bearish now than they have been in some time.  Long-term moving averages are still sloped lower, defining the longer term trend.  The ADX is lurking below 20.  IF that rises above 20 as the moving averages move lower, that suggests are market that is beginning “to trend” again and will support the argument for prices going sub-90 cents.

Coffee Futures Moving Average Sequence

Coffee Buyers’ Perspective

Getting a birds’ eye view and a coffee buyer’s perspective, we can see this forecast will provide an excellent, long-term bottom for procurement.  One should not be surprised if coffee prices are double their value in 2022.   Critical resistance of 114.05 can also be used as a trigger to become more aggressive in pulling the trigger in purchasing as this is where the wave count and forecast becomes invalid.  It typically means that there are other, new forces in the market that we will read about in the news after prices have moved.  Given the historically low levels coffee is currently at, settlements above 114.05 would call for action to shore up your exposure in 2020.

Coffee Buyers Perspective